CN prepares for Canadian harvest

MONTREAL, QUEBEC, CANADA — CN said on July 28 that Canada's rail transportation system is ready to accommodate the new harvest. The supply chain will also be able to address the excess carry-over from last year's extraordinary crop by as early as next spring.

Claude Mongeau, president and chief executive, said, "CN posted a record performance in the 2013-14 crop-year just ending — our movement of Western Canadian grain was a full 25% greater than past average performance.

"We can be proud of our performance and for making good on the commitments we gave the federal government a month before the order-in-council requiring railways to move specific grain volumes took effect last March.

"By virtue of normal commercial incentives, the grain handling and transportation system is now fully back in sync and ready to accommodate the upcoming harvest. This positive development is very encouraging and calls for careful balance from the federal government in how it pursues the regulatory agenda it announced in haste in the midst of a very difficult winter."

Mongeau said CN transported record grain volumes last fall until extreme cold weather affected the rail industry's ability to move grain efficiently between mid-December and early March. In February, CN promised the federal government it would ramp back up to record performance as soon as the weather eased. The weather clearly challenged CN's operations, but the company's winter grain shipments ultimately turned out to be 2% below normal winter volumes.

CN's run rate of spotting approximately 5,500 grain hopper cars per week since April has exceeded unconstrained orders placed by its customers, and its wait-list has declined significantly in the last few months due to a high level of order cancellations. As such, CN's wait-list now represents a normal level of only one week of shipments.

With the rail transportation system running efficiently, Mongeau said the grain supply chain is very well positioned to handle the coming harvest.

"According to Agriculture Canada, the carry-over from the crop-year just ending will be about 18 million tonnes, only 5.5 million tonnes higher than an average carry-over. Given a late-planted crop this spring, the supply chain will have another five or so weeks to deplete stocks further by five to six million tonnes prior to the harvest starting in full gear. All this means there should be sufficient storage capacity available in the system.

"Looking forward, given Agriculture Canada's latest 2014-15 crop forecast of 59 million tonnes — slightly higher than a trend-line average crop — the current throughput level for the rail industry should be sufficient to eliminate all the excess carry-over of grain by as early as next spring."